In a sign that the superannuation system is maturing, organic growth (as opposed to investment returns) has fallen to just 3.1 per cent, according to Tria Investment Partners.
In its 2015-2016 Tria Super Funds Review, industry consultant Tria Investment Partners found that 80 per cent of net inflows are controlled by just 12 of the 85 superannuation funds currently operating.
Tria's review also found that a “meaningful proportion” of large superannuation funds are in net outflow.
“APRA [has] agreed [with us], making public comments last week to the effect that 45 per cent of the superannuation funds it regulates are not generating enough in contributions to offset benefits paid to members and balances transferred to other funds,” said Tria.
Along with the fact that only 12 superannuation funds are “winning” when it comes to net inflows, the industry's organic growth rate “continues to tumble”, said Tria.
“[Organic growth] came in at just 3.1 per cent in 2015, down from the lofty heights of 5.7 per cent just seven years ago.”
“The implication is that system growth will be driven more by investment returns in future and growth will be more volatile as a result.
“So, whilst the system will continue to grow, it is maturing. Classically in a maturing industry we expect to see growth concentrated in fewer firms (which we are seeing in super) and some participants who are no longer successful exit through failing or consolidation (which we are not seeing).
“It is difficult to see the objective case for 85 super funds continuing to exist, especially when many are in outflow. The supposed barriers to consolidation are well known,” said Tria.